EU – Baltic States, Financial Services, Latvia, Pensioners

The Finance Ministry and the Welfare Ministry are currently working on an official letter to the IMF, explaining why the government approved the proposal. The letter will be sent to the IMF in the near future.

The two ministries will emphasize in the letter that reducing the proportion of social payments into the 2nd pillar pension plan is part of the planned structural reforms in Latvia, and the money saved through cutting the proportion of social payments into the 2nd pillar pension plan will be used for covering the cost of several social security mechanisms and the budget deficit.

This will be particularly important to Latvia in case money from the international lenders reaches Latvia later than expected.

LETA has unofficial information that Latvia is yet to reach agreement with the international lenders regarding the planned changes in the state pension plan.

Earlier this week, Saeima did not vote on the proposed changes in the state pension plan in the final reading, and gave the government one more week to reach agreement with the IMF.

As reported, the amendments state that, starting May 1, the proportion of social payments into second-tier state pension plan will be reduced from 8% to 2%. From January 1 next year, the proportion of social payments transferred to second-tier pension plan will be increased to 4%, and in 2012 to 6%, state the amendments.

Welfare Minister Uldis Augulis (Union of Greens and Farmers) earlier said that LVL 106.5 million would be saved through decreasing the proportion of payments into the state-funded pension scheme, which would be spent on improving social security.